Balance Product Development and Branding in Your Budget
There's no one-size-fits all solution to startup spending. Avoid wasting hard-earned money. But don't skimp on these three things.
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In short, branding is what people say about your company when you're not in the room.
Whether that message correctly communicates your image is where "branding" comes in and it's all about what you want people to think of your company. Perception is reality.
Entrepreneurs need to strike a balance between perfecting the image and impression of a company and developing its infrastructure and product. Branding efforts employ the use of marketing, public relations and promotion to achieve the right image, which should match the desired positioning laid out in the business plan.
Is there a more misunderstood expression in the corporate world than "You need to spend money to make money"? Inexperienced entrepreneurs often use this line as an excuse for excessive spending, interpreting it to mean "if you're spending money, then you're making money." In fact, the opposite is true.
There's no one-size-fits-all solution to budgeting at a startup. Sure, there are benchmarks to watch and baseline needs to address.
The most important place to spend money is on developing a quality product, but that doesn't mean ignoring branding. Without it, a quality product could easily go unnoticed.
Roger Michael, founder of the I AM ROCKSTAR agency and a brand ambassador in London for my company, InList, knows branding's power. "Perception and image are key components of a business's future expansion," he told me. "But they have to be targeted according to the profile of the business. Effectiveness and efficiency is what we're aiming for -- not a slapdash percentage or chunk of capital."
The following are three key areas that an entrepreneur can't afford to skimp on when it comes to creating a branding budget:
Related: Shark Tank Star Daymond John Says This Is the Biggest Branding Mistake of All
1. The name.
The wrong name can kill a company virtually before it has even launched. Spend hours of brainstorming and gather feedback from customers and colleagues to determine whether the name is conveying the intended message. Make sure the proposed name isn't being used by another entreprise and that you can get the related URL.
Today the Coca-Cola name is the second-most understood term in the world as Mark Pendergrast pointed out in his book For God, Country & Coca-Cola. That's power.
2. A brand identity.
Fashioning a brand identity for a company includes shaping a logo and a style guide, which will dictate the design of its website, business cards and letterhead. You'll want the business to be taken seriously, so when designing imagine what a client's, investor's or customer's first impression would be.
Two years ago, I created an app, InList, without giving much thought to branding. The result was a complete failure. I invested in high-quality designers to redesign the company from the ground up and this changed everything and resulted in significant numbers of membership applications and investor interest.
Related: The Four Ms of Social Media That All Marketers Should Master
3. A social media presence.
There's no need to sink a lot of money into social media initially, but it's important to have points of reference to let investors and customers see what the company is all about. A social-media presence lends some legitimacy. If the content is engaging, it can serve as a gateway for new customers.
PetFlow, for example, has cultivated Facebook traffic. The pet-food delivery startup curated the web's cute and funny animal photos and videos.
So how much should be set aside for branding?
If your company needs to turn a profit early, the advertising budget should be based on a percentage of sales and gross profit.
But if your primary goal is building a user base, explore a cost-per-user model. That way, you can track spending and determine whether the branding is effective.
And evaluate referral sources. The more targeted your advertising is, the more effective it will be. Track the customer-referral sources to determine which avenues are scoring new clients and which are wasting money. Closely monitor what's spent on branding to determine whether it's effective and adjust accordingly.
Of course, it's necessary to spend money to make money, but be sure to spend it in the right places.
Related: Leading, and Surviving, a Company Rebranding Effort